Hoboken Mom Condo Living
Planning the long-term & juggling the everyday

First of all, take a deep breath. You are embarking on a road that takes great mental strength and endurance. Second, get your facts straight.

The standard NJ realtor commission is 6%, split between the buyer and seller agents. The listing agreement you sign as a seller delineates the commission split, but it is usually 50/50. When there is a referring agent, that person receives 1% and the remainder is split between the buying and selling agents.

You can negotiate the commission down to 5% with most agents. 4.5% is the lowest most of them will go. I had a 4% commission on the listing agreement for the sale of my Hoboken 2BR and paid 3% on my 4BR purchase. Negotiating those terms with the realtors caused about 45% of the stress from my sale-contingent purchase (another 45% came from the mortgage process and the remaining 10% went to the usual paperwork/juggling act hassle).

Here’s the secret; you and your buyer can negotiate a reduced commission with your agents. Basically, both brokers have to sign off on accepting a lower commission from the one on the listing agreement, but it can be done. In my case, the deal would not have happened without the lower commission because the seller and I had both given up more than we wanted. He went down below his lowest #, I went above mine, and we were still about $10k apart.

There were three critical factors to negotiating the reduced commisson:

1. The unit I purchased had been listed for quite a while, with several price drops, and the listing agreement was about to expire. Expired listing = $0 for the seller’s agent.
2. My purchase and sale were tied together. 4% of my 2BR sale + 3% on my 4BR purchase made it worthwhile for the listing agent (same one on both deals) to take the commission hit (I listed my 2BR after I went into contract to buy my 4BR).
3. The buyer and seller on my 4BR were in frequent, close contact. This is the reason why most commissions don’t get negotiated down. Your agent is your ally, yes, but don’t forget he or she is also making money off of you. I estimate my buyer’s agent got compensated at about $1k/hour. She sent me a bunch of listing emails and took me and my family (toting two toddlers through ice and snow; fun!) to one day of showings (we saw five properties). I believe in compensating people fairly for work done, but I can’t think of any industries that warrant pay on that level; maybe astronaut?

If you have a reputable agent (I was working with the biggest agency in Hudson County) then you will not see any difference in performance on your sale due to the lower commission. I had over 50 showings in a two-week period in December 2008, the slowest real estate month in a down year for real estate. It can’t hurt to ask for a reduced commission; the worst thing that happens is your agent says no.